Step 2: Learn How to Organize Tax Records

Step 3: Begin the Process by Chipping Away at Organization and Prep

I don’t recommend a marathon session of tax organization and prep. The only time it makes sense to do this is if you’ve procrastinated and you’re up against a filing deadline. The point here is to avoid that. It’s too stressful! And as we all know: when you’re up against a deadline the odds of making a mistake rise exponentially. Let’s not go there.

Instead, open your calendar and schedule some dates to start gathering and organizing records. 30 or 60 minute appointments will allow you to chip away and make progress:

First appointment

Assuming your accounts are reasonably up to date (income and expense entries are current), do a quick check. Does it make sense to pre-pay 2017 expenses [bar dues, professional liability coverage, rent] or contribute to your IRA/retirement fund? Make this assessment early to take advantage of 2016 deductions.

Second appointment

Prepare to organize your records. Physically gather receipts. If necessary, schedule follow-up appointments to finish the process. If your records are digital, use this time to pull all receipts into one 2016 expense folder. If you have unscanned receipts, catch up on your scanning.

Third appointment

If you are paper-based, label a manila envelope “Personal Expenses.” Start sorting your paper receipts. For now, anything that is a personal expense goes into the “Personal Expenses” envelope to be dealt with later. If your records are digital, create a file folder labeled “2016 Personal Expenses” and segregate personal receipts. Once you’ve achieved this basic separation, start organizing your business expenses. This can be done a variety of ways – see the reading above. While date order is good, it is preferable to sort by expense category first, then by date. If necessary, schedule follow-up appointments to finish the process.

Future appointments

You get the drift. Even the most robust procrastinator can generally commit to increments of 30 or 60 minute appointments. Keep moving. Anything you do helps advance the cause.

Step 4: Jumping Ahead to the CPA

If you already work with a CPA, hallelujah! If your CPA is like mine, he or she will automatically send you a tax organization packet, which will go a long way toward helping with the steps above.

You Do your own taxes?

I know some of you are stubbornly independent, as I once was, and you prepare your own taxes, as I once did. Please: at least contact a CPA for a ballpark estimate of what it would cost to delegate this task. What can it hurt? You can still prepare your own taxes if you prefer.

But my taxes are simple!

Kudos! Guess what? The cost to prepare your return will be nominal. If your taxes are complex, anything you pay a CPA will be well worth it.

I have used CPAs for business, personal, and trust-related tax preparation and have never been sorry I did. The prep work is enough for me! Try it at least once and see what you think. I’ll bet you free admission to one of my future CLEs that you won’t go back to doing your own tax returns. Select the Contact page on the menu above to take me up on this offer.

Succeeding in practice requires momentum, courage, and hard work. No one knows
that better than a solo practitioner or small firm lawyer.

Whether you’re starting out, retooling, or want to make a change, consider this sage advice from Ann Guinn, one of the presenters at the Oregon State Bar Solo & Small Firm Conference. She may just motivate you to get moving!

All Rights Reserved 2016 Beverly Michaelis

Postscript

For related content with a greater focus on the financial side of practice see this post.

In the annals of professional liability, there is one statistical truth: sue a client to collect fees and odds are the client will sue you for malpractice.

How can you avoid this dilemma? Be proactive! Develop policies and procedures designed to preserve client relations and avoid collection problems before they start. In short, follow the seven golden rules of billing and collections:

Always take the time to discuss fees, costs, and billing practices. Most nonpaying clients who file retaliation suits or malpractice counterclaims do so because they never understood what the lawyer’s services would cost.

Never leave home without a written fee agreement. Be specific and complete. Your agreement should: (a) specify the scope and timing of services; (b) describe what the client is expected to pay for and when; (c) explain billing practices; (d) identify what will occur if payment is not timely made. Losing a potential client who refuses to negotiate and agree to a comprehensive fee and engagement agreement is a small price to pay compared to defending yourself in a malpractice claim or disciplinary proceeding.

Consider alternative fee arrangements – flat fees, fixed fees, unbundled fees, evergreen retainers, or “last month’s rent.” Clients cooperate more fully when they are financially invested in their case. If the client is unwilling to commit financially, the matter quickly becomes your problem rather than the client’s.

Be a smart biller: (a) review “pre-bills” and statements carefully; (b) if you make a mistake, correct it quickly and accurately the first time; (c) send statements before clients receive their paychecks – usually just before the 15th and again at month end. If you serve corporate clients, send bills in a manner and format that works for the accounts payable department; (d) always include a due date on all statements (most clients prioritize bills based on due date); (e) offer a carrot instead of a stick. In lieu of late fees or interest, offer clients a discount if payment is received within 10 days of the billing date.

Do not allow outstanding fees to accumulate during the course of representation. As soon as a payment is missed, call the client. Get to the root of the nonpayment. Is the client dissatisfied? If a client becomes seriously delinquent, terminate the attorney-client relationship and withdraw from representation if possible. Re-read last week’s post and comply with all provisions of Oregon RPC 1.16 as well as applicable court rules. Read more here about the do’s and don’ts when ending representation.

We’ve all been there. Non-paying clients can be incredibly frustrating, especially if you went out of your way to offer a reduced rate or special payment plan. But before you resort to punitive measures, take a moment to think it through.

A literal doubling of your fee is likely to be challenged as excessive. Review Oregon RPC 1.5.

Consider whether the proposed punitive action will make a difference. Do you truly believe that doubling your fee will motivate the client to pay?

What are the Ethical Implications of Bartering?

When a lawyer accepts in-kind payment for legal services, whether the payment consists of the client providing services to the lawyer or an ownership interest in the client’s business, the lawyer is going beyond simply establishing a contract for legal services, and instead is doing business with a client. When entering into a business transaction with a client, lawyers must follow the requirements of RPC 1.8(a). [Excerpted from Alternative Pricing Models: What’s in a Fee?]

This means:

The terms of the agreement must be reasonable and fair.

Your fee agreement must be in writing.

You must obtain the informed consent of your client to proceed (usually contained within the fee agreement).

You must recommend that the client consult with another attorney in deciding whether consent should be given.

You must fully disclose the details of the business transaction and each party’s role (part of informed consent).

Bartering and Professional Liability Exposure

Prior to 2016, Oregon lawyers were required to provide the Professional Liability Fund [PLF] with copies of business transaction disclosure letters or risk exclusion of coverage. The reporting requirement to the PLF has been removed for plan year 2016. Lawyers are no longer required to provide the PLF with copies of disclosure and consent letters when engaging in business transactions with clients. As a courtesy, the PLF continues to offer a sample disclosure letter on its Website.

Beyond the Obvious Ethical Traps and Liability Exposure

Barter exchanges have practical implications. Ask yourself:

If you do not complete the work for the client, how will you “refund” a portion of your “fee?”

Understand how your professional liability coverage works. The PLF Primary and Excess Plans are available on the PLF Website. Call the PLF with coverage questions: 530-639-6911 or 800-452-1639 (Toll-Free in Oregon.)